NEW DELHI – When India’s Finance Minister Nirmala Sitharaman claimed that apreference by millennials for ride-hailing apps was contributing to apainful slump in car sales, it sparked an online backlash from furiousyoungsters.
They started a campaign using ironic hashtags such as #BoycottMillennialsand #SayItLikeNirmalaTai last week to push back against older generationsblaming them for today’s problems in society.
While data shows firms such as Uber and Ola are popular with youngerconsumers more comfortable with shared mobility and digital trends,analysts say the auto industry’s problems run deeper than that — and it isfacing more serious bumps in the road.
With a population of 1.3 billion people, India is the world’sfourth-largest car market and one where owning a vehicle is as much astatus symbol as a means of transport.
But the country’s once-booming auto sector — seen as an importantbarometer of overall economic health — is in the slow lane, with salesslumping for the 10th-straight month in August.
“The minimum (priced) car that you can get nowadays starts from six toseven lakhs ($8,500 – $9,800),” university student Somya Saluja told AFP.
“So it’s much easier to pool-in rather than to buy a new car.”
Even India’s richest banker, Uday Kotak, recently said that his son wasmore comfortable using ride-sharing apps than owning a car.
Uber and Ola reportedly facilitate some 3.65 million daily rides.
Still, Avanteum Advisors managing partner VG Ramakrishnan told AFP the keyreason for the drop in car purchases was economic.
“I think the slowdown is primarily because consumer confidence is low andincome growth has really been impacted in the last couple of years,” hetold AFP.
India’s economic growth slowed for the fifth-straight quarter in April-Juneto reach its weakest pace in five years.
Banks are also more reluctant to lend owing to a liquidity crunch caused bythe near-collapse a year ago of IL&FS, one of India’s biggest shadow banks– finance houses responsible for significant consumer lending.
There are also extra production costs caused by new rules requiring cars tobe compliant with emissions and safety standards, while a 28 percent goodsand services tax (GST) introduced in 2017 has dampened demand, analystssaid.
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“Cars are increasingly becoming unaffordable now because of so many taxes,”Karvy Stock Broking auto analyst Mahesh Bendre told AFP.
“To put things in perspective, if you buy a car in India, at least 40-45percent of costs go to the government in terms of taxes and registrationcharges and so on.”
– Calls for tax cut –
A year ago, India displaced Germany to become the world’s fourth biggestcar market, having clocked up annual sales growth above seven percent forseveral years.
But the promising growth ride is screeching to a halt, with passenger carsales tumbling this year, including a 41 percent drop last month — theworst since records began more than 20 years ago.
Aside from passenger cars, sales of commercial vehicles, motorcycles andscooters have also been hammered.
With the industry — a major employer in India — contributing more thanseven percent to total GDP and almost half of manufacturing GDP, thepotential fallout from an extended slowdown is sending shockwaves throughthe economy.
Manufacturers are reducing production and cutting jobs, which is alsoaffecting related industries such as auto component manufacturing and atdealerships, totalling about seven percent of India’s total workforce,Bendre said.
“The entire ecosystem is huge — around 20 percent of the population couldbe dependent on the auto sector,” he added.
In a bid to boost sales Sitharaman has lifted a ban on governmentdepartments purchasing new vehicles, but automakers say she needs to domuch more — such as cutting GST to 18 percent ahead of the festive season,traditionally a bumper sales period.
With India home to 22 of the world’s 30 most polluted cities, according toGreenpeace, any sales incentives have to factor in the environmentalcrisis, Ramakrishnan said. -APP/AFP
